Last week's plunge in the stock market was certainly unnerving, especially for retail traders. But don't worry; a few bumps in the road are to be expected, and a little volatility can be good for our options trades.
Today, we're getting right back on the same path and riding the market's positive momentum since last week even higher. The best options trade to make today actually zeros in on an industry with especially bullish momentum. It's a trade available to anyone with an options account, including Robinhood and WeBull traders.
But before we get to that, let's talk about what happened last week and why we aren't ready to go bearish just yet.
The days leading to the June 8 high were rather strong and the Nasdaq topped the 10,000 mark for the first time ever with a series of all-time highs. But seemingly in the blink of an eye, a cautionary outlook from the Fed and spikes in virus cases sent traders heading to the exit doors.
However, volatility - even big volatility - can be good for investors as it can create bargains, if you know where and when to look. That's where our team of options trading pros comes in. They are using their proprietary tools to scour the markets for moneymaking opportunities, like the trade we'll show you today.
Options 101: It's never been easier to learn how to trade options, especially with our free guide from top trading expert Tom Gentile. Click here to get it.
Today's trade is in an area of the market that you might have overlooked. All the recent excitement has been in tech stocks with a smattering of value plays in the financials. But it's hard to gain an edge when everyone is already doing the same thing. That's why we are looking at a sector that's really been out of favor for a while but is finally coming back.
The oil market has been on a roller coaster this year. From demand getting crushed as the economy shut down to the insane drop below zero in April, the price of a barrel of crude has been under constant pressure. It was no wonder that nobody wanted to touch energy stocks.
That is the best time to start looking - when nobody else is.
Now that state after state is starting to reopen their economies, Money Morning Options Specialist Tom Gentile thinks that it is time for oil to stage a comeback.
Despite the pandemic, people are traveling more, especially now that summer is around the corner. Increasing business activity means higher demand for energy. And don't forget we've already seen surprisingly strong reports in jobs and retail sales. Plus, the Fed has pledged to do whatever it takes to get the economy back on its feet again, including pouring trillions into the economy.
That's going to fuel our latest options trade even higher over the summer months.
It could triple your money by July...
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The Best Options Trade on Robinhood Now
Tom is bullish on Exxon Mobil Corp. (NYSE: XOM), which has been in a quiet recovery since the March low. Chart watchers will like that it moved above its 50-day average and bounced off it this week. The average itself has also turned higher, which is a good intermediate-term event.
You see, a moving average takes out the wiggles of the day-to-day trading and leaves behind a better indication of whether the stock is generally rising or falling. In this case, it is rising. As long as the stock is above the average, we know the intermediate-term trend is still intact.
Now, with the economy opening, people will need more gasoline in their cars, and airlines will need more jet fuel in their planes as they build their route systems back. Integrated energy producers like Exxon should benefit from increased demand.
Tom's price target on XOM is $55 per share. That is about where it traded last week at its recent high and only 14.1% above its Tuesday close of $48.20. Considering it took only a few days to fall that far, if the market stays firm, Exxon Mobil should reach that target in short order.
But as usual, we can add a little juice to the trade with options. You can use the July 24, Exxon Mobil $52 call. This option closed Tuesday at $1.75.
If the Exxon stock reaches Tom's target of $55 by early July, you could be looking at a 280% gain.
The best part is that your risk is lower than buying the stock outright. One-hundred shares of XOM stocks would cost $4,820 but the option costs $175. As always, while options help lower your risk, they do come with risk. Make sure you don't put more money in than you're willing to speculate with.
And if you want our experts to send their options trades directly to your inbox in real time, we have an exclusive invitation for Money Morning readers.
Learn how you could capture 52% gains, 78% gains, and even 108% gains in a matter of days, right here.